The interfollicular epidermis contains a single type of terminally differentiated keratinocytes, whereas hair follicles are composed of a minimum of six or seven distinct types. Whether or not these various populations of terminally differentiated keratinocytes originate from one or more progenitor cells has not been established. A related and important question is whether keratinocyte progenitor cells with a pluripotent potential, able to form not only epidermis but also hair follicles, can be maintained in vitro for any period of time. We have addressed these questions using skin reconstitution assays with admixed populations of genetically labeled, cultured keratinocytes. Examination of reconstituted epidermis and hair follicles showed that neither was composed of a random mixture of differently labeled keratinocytes, as would be predicted if they originated from a random reassociation of cells. Instead, the reconstituted interfollicular epidermis contained distinct columnar units, comprising all the overlying layers and most likely derived from a single progenitor cell. In contrast, hair follicles were found to be composed of cells of multiple origin, with each population showing a striking localization to a separate concentric region. The vast majority of reconstituted follicles appeared to derive from a minimum of two or, in a significant fraction of cases, three progenitor cells, one for the generation of the shaft (cuticle, cortex, and medulla), one for the inner root sheath, and the third for the outer root sheath. The general implications of these findings for epidermis and hair follicle formation and for keratinocyte stem cell cultivation are discussed.